Annotations for Countries: Philippines

Our feature today is an article on the world food situation from the August 73 issue of Science Magazine, the American Association for Advancement of Science Publication. Last July, for almost the first time in living memory, the crop report prepared by the United States Department of Agriculture rated a spot on the CBS evening news. To consumers perplexed by rising food prices, the prediction of record crops was doubtless welcome, if maybe deceptive news. To economists concerned about the world food situation, the relief was of a different order. A poor harvest in the United States could mean disaster for some countries that depend on American food exports. 

The world food situation is more serious now than at any time since 1965 to '67, when an armada of American grain shipments saved perhaps 60 million Indians from possible starvation. The immediate cause is a bout a freakish weather that has visited droughts on some parts of the world, floods on others, and given the 1972 harvest much worse results than was expected. All countries except India have now bought enough grain, though often at ruinous prices, to cover their immediate needs, but the world's grain stocks are down to their lowest level in 20 years, and whether or not there will be enough food to go around next year depends on the success of crops now in the ground. 

The omens so far are that crops will be good around the world as long as the weather stays favorable and epidemics hold off. But the touch and go nature of events has rekindled anxieties about the world food situation. Beyond the immediate question of whether this year's crop will produce enough food to avoid major price disturbances, political instabilities and famines, there is concern that the present alarms and scarcities may reflect not just last year's bad weather, but a fundamental deterioration in the world food situation. Already, there are those who foresee a period of food scarcity in which those with food to sell will have a useful political weapon in their hands. 

Governments of developing countries will find this year that the soaring prices of food grains and freight rates have driven their imported food bills up by 60%, or roughly $2 billion, and a drain on foreign reserves of this could, if it should continue, threaten to retard economic development and make the gap between rich nations and poor nations grow faster still.

Much besides the threat of famine therefore hinges upon the ability of developing countries to make crop yields grow faster than people. The salient fact about the world food situation is that for the past 20 years, food production has increased at a rate just slightly faster than population. A fact that, were it not for major inequities in resource and income distribution, could translate into a very slight improvement in per capita diet.

Yet even disregarding the uneven rates of consumption, this average diet is precariously close to subsistence, and those even slightly below it are undernourished. The present extent of malnutrition in the world is a matter of debate because of arguments about how it should be measured, but according to the Food and Agricultural Organization, the FAO of the United Nations, perhaps 20% of the population of developing countries, or 300 to 500 million people, are undernourished, in that they receive less than the recommended intake of calories, not to mention protein. Alan Berg, World Bank deputy director for nutrition, estimates that of the children born today in developing countries, roughly 75 million will die before their fifth birthdays for malnourishment or associated illnesses. 

The article continues, "Regarded from a gross overview, the world's situation over the last two decades appears tolerable, if not precisely ideal. Countries with a food deficit have been able to buy cereals at reasonable and stable prices from the grain exporting countries." In short, the remarkable feature of the world food situation in retrospect has been its general stability. Perceptions of it, however, have followed a strangely erratic course over the last decade, lurching from pessimism to optimism and now back towards gloom again. 

In the mid 1960s, doom saying was the fashion. The USDA forecast that the concessional food needed by developing countries would eventually exceed what the United States had available to give away. Strikingly enough, the date calculated for this dire event turned out to be 1984. The USDA projections formed the basis for Famine 1975, a well-written and widely-read track by brothers William and Paul Paddock. The Paddocks took the USDA's figures, but assumed a slightly faster rate of population increase, and concluded that the famine era would arrive nine years ahead of time in 1975. 

The famine talk of the mid-1960s suddenly lost credence in the face of a new phenomenon, part-agricultural and part-public relations. The Green Revolution, with its wonder wheat and miracle rice, swept the headlines like wildfire, but they swept the wheat and paddy fields of Asia at a rather slower rate. 

Developed at an agricultural research center in the Philippines and Mexico, the new strains of rice and wheat did indeed produce yields many times greater than native varieties under certain conditions. The promising performance of the new strains in India and Southeast Asia suggested that the rate of food production could be increased from 2% to 4% or 5% within a few years.

Aided by favorable weather conditions, the new Mexican wheats produced bumper crops. India announced she would become independent of all foreign grain imports by 1973, and the Philippines pinned to become a major exporter of rice. And in the general euphoria, even the United Nations Food and Agricultural Organization began to talk as if the real food problem would be one of surpluses, not scarcities. But from this high point, enthusiasm about the Green Revolution has slowly subsided, dipping occasionally into positive vilification.

The basis of the criticisms lies essentially in the fact that modern agricultural technology is no quicker or less painful to apply in the developing world than it has been in the advanced nations. High-technology farming in the underdeveloped world generates massive rural unemployment, as it did in the United States. The new strains of wheat and rice, which are the spear point of Western agriculture, require fertilizer, irrigation and the learning of new skills, all of which rich farmers can acquire more easily than the poor. The scarcity of land capable of this highly-specialized farming also greatly restricts its general applicability. 

The high-yield strains are also extremely sensitive to disease, a problem that the advanced countries themselves have yet to successfully cope with. After the optimism about the Green Revolution began to appear overblown, it required only a few bad harvests to set the pendulum swinging back toward despair.

The strange events of 1972 have done just that, although bad weather and an unlikely combination of circumstances were the principal cause, the resulting havoc was quite disproportionate, demonstrating the system's possible fragility. First, the Soviet Union had another bad harvest. The Russians bought 30 million tons of grain on the world market. The amount was enough to set grain prices soaring to historic heights, and to double world freight rates.

Other countries too were in the market, Indonesia and the Philippines for rice, India for grains. Drought in the countries bordering the southern edge of the Sahara caused a bonafide famine, which has affected between one and 10 million people. The Peruvian anchovy industry failed almost completely last year, and may be permanently damaged because of overfishing. And since the anchovies were the source of much of the world's supply of fishmeal, livestock owners turned heavily to grains and soybeans to feed their animals. 

The outcome of these various demands was dramatic rises in international market prices. In the short-term, it looks as if the scarcities that followed in the wake of the 1972 harvest will ease off, stocks will be rebuilt, and prices will subside to near their normal levels. The longer term prospects for the world's food situation depend on the viewer's perspective. If the optimists have the better record in the debate so far, they also have the harder case to make now. The optimist position is essentially the economic thesis that agricultural production can expand to match demand. 

But their critics respond, "Demand represents only what people can afford to buy, not what they need." On this view, the income of people in developing countries is likely to be the primary constraint on food intake for the foreseeable future, and the production will match up to whatever the market can afford. One analyst, Anthony S. Royko, says, "The United States could double or triple food production if the price was right. However, a review of the dynamics of underdevelopment in a capitalist system does not leave one massively optimistic when considering the cost to underdeveloped nations in increasing their immediate purchasing power." 

Moreover, the article continues, "US food surpluses, whether sold or given away, may help to avert shortages in particular countries, but can cover only a fraction of the expected increase in food needs of the developing countries. These nations must meet the major part of the food requirements themselves." Unfortunately, it is in predictions of likely agricultural productivity increases in the developing world that the professionals become more pessimistic. Among the reasons most commonly argued are the following. 

First, the Indicative World Plan, drawn up by the Food and Agricultural Organization, postulated that there could be slight improvement in the world's diets by 1980 if the agricultural production of developing countries met certain specified goals. So far, the progress made in meeting even the very modest goals of the FAO's plan offers little cause for enthusiasm. Between 1962, the base year of the plan, and 1975, agricultural production in developing countries was supposed to increase at a rate of 3.4% per year. In fact, the average growth rate between 1962 and 1970 has been only 2.8% per year, dropping to 2% in 1971 and to 1% last year. 

One of the few goals successfully met is that for farm machinery, which has been considerably exceeded, this since it adds to rural unemployment is a mixed blessing. Modern agricultural techniques used in the context of a developing capitalist economy not only increase the gap between rich and poor farmers, but are more likely to reduce jobs than to create them. Yet, rural areas in which the bulk of the population increase is to occur are where jobs are most needed. 

The high-yield strains of rice and wheat could cause a disaster for the populations they support because they are genetically more uniform than the native strains they replace and hence more susceptible to an epidemic. The plant breeders who devise the new strains are well aware of the problem, but are nowhere near a solution. 

Prevention and control of such epidemics is a hard enough task for the United States, and requires skilled manpower that developing countries using the new seeds may not possess. Although the trend of agricultural production in developing countries has been steadily upward, there is no guarantee that it will continue to rise. Future gains may be harder than those already made, the best land has already been put under plow, the most convenient water sources already tapped. Production of protein especially seems to be bumping up against certain constraints. 

The article continues, "This year's projections by the USDA Economic Research Service forecast that the world's capacity for production of cereals at least will increase faster than consumption, but projections explicitly assume normal weather conditions. The weather may not be so obliging." 

Whatever the real extent of malnutrition in the world and maldistribution of existing resources, there seems to be no certain prospect of substantial improvement, and the fair chance of degradation in the immediate future. Protein has become a seller's market. In recent months, there has been a clear trend of richer countries pulling protein away from the poor.

A similar dynamic exists inside the underdeveloped countries themselves, where economic elites' demands for meat may well price grain out of the poor man's mouth, given that it takes about seven pounds of grain to produce one pound of beef. The article concludes cautiously, stating that, "For the moment, the general world food situation seems stable, if a little precariously so." Most experts are agreed that 1972 was probably just a bad year, not a turning point.

In the longer term, the world's agricultural capacity is clearly not yet stretched to its limit, and any deterioration in diet on this account is likely to be gradual. However, any real immediate improvement or deterioration in the average diet is more likely to be linked to social and economic structure than to natural phenomena. 

The British News Weekly, Latin America reports that the expropriation of Cerro de Pasco Corporation and its assets in Peru on New Year's Day was a logical step forward in that government's efforts to bring the Peruvian economy under national control, but it had long been avoided for three reasons. In the first place, there was a very real fear that of another confrontation with Washington and of scaring off potential investors in the mining projects which the government was desperately anxious to open up. Secondly, Cerro's operations in the Central Andes are extremely antiquated having been run down over the past few years and would require substantial investment. And thirdly, Cerro de Pasco was deeply involved in the medium-sized Peruvian mining operations, which will now effectively fall into the control of the state sector of the Peruvian economy. 

Sources in Washington have been hinting recently that the Nixon administration was prepared to allow the Peruvian government to nationalize Cerro without making too much fuss and that there will shortly be a package deal covering all the matters still outstanding between the two governments. The vex question of the International Petroleum Company, a Rockefeller concern nationalized by Peru in 1968 will not be mentioned, but the Peruvians are believed to have given some ground in the question of compensation for WR Grace's Sugar Estates. 

Apparently, President Nixon's special representative James Green of Manufacturers Hanover Bank was kept informed of all developments leading up to the expropriation. The packages reported to include a number of United States loans, some of which will be used to pay compensation to the Cerro Corporation, Cerro de Pasco's parent company. 

The Cerro management is very well aware that it's 20% stake in the Southern Peru Copper Company is worth more than all of the assets of Cerro de Pasco combined. Certainly Cerro was unhappy to be losing Cerro de Pasco says Latin America, but the best two thirds of a cake is much better than no cake at all. It may yet be that there will be disputes over the whole issue as to who owes what to whom, but no one apparently expects the repeat of the international hullabaloo, which followed the expropriation of the International Petroleum Company in 1968. 

Cerro de Pasco for many years virtually ruled Central Peru. Not only were its own mines scattered through the mountains, but it purchased ores from independent miners and had large stakes in most important mining operations. It ran a large metallurgical complex, a railway, several hydroelectric generating centers and vast haciendas, which have all been expropriated under agrarian reform legislation. These holdings had been built up during the course of the past half century and formed the basis for a corporate empire with metal fabricating plants in the United States and investments in the Philippines and Chile. 

The Rio Blanco Mine in Chile was nationalized by the popular Unity government in 1971. Cerro has feared nationalization in Peru ever since the military took over the International Petroleum Company in 1968. The management was acutely aware of the company's exposure there, and this was reflected in the persistently low value of the company's shares on The New York Stock Exchange. In these circumstances, the company was reluctant to invest in its Peruvian operations. 

In the preamble to its decree of expropriation, the government accused the company of neglecting essential maintenance of polluting rivers despite government orders to clean up its operations and of exploiting only the richer ores on their mining concessions. This latter point of rapidly mining only the richest deposits just before an expropriation is important since normal mining practice is to maintain steady productivity throughout the maximum economic life of a mine. Asset strippers try to maximize profits for a few years leaving quantities of low quality ores, which by themselves would be uneconomic to mine. 

The problems which the new Peruvian company set up specifically to take over the Cerro de Pasco mines is likely to face, go far to explain why the government was always reluctant to go ahead with the expropriation, that from the British News Weekly, Latin America.